JC3
Posts: 290
Posts: 290
Posted:
We will change from accrual based to cash based accounting. We haven't had a full audit for several years, and hope to have one done. should it be done prior to the change to cash based accounting?
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accounting change and audit
Started by JC3 • 5 replies • 1307 views
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SusanW1 (Michigan)
Posts: 5,202
Posts: 5,202
Posted:
Sure wouldn't hurt. Motion for an audit (if you have the money) or an audit review at the next Board meeting.
JanP1 (Arizona)
Posts: 76
Posts: 76
Posted:
Audit is a good idea.
But just curious why are you going back to cash based accounting. NV, by regulation, requires Accural -based on the AICPA’s Statement on Standards for Accounting and Review Services. http://www.leg.state.nv.us/NAC/NAC-116.html
I know accrual takes some time to understand, but just wondering.
But just curious why are you going back to cash based accounting. NV, by regulation, requires Accural -based on the AICPA’s Statement on Standards for Accounting and Review Services. http://www.leg.state.nv.us/NAC/NAC-116.html
I know accrual takes some time to understand, but just wondering.
JanP1 (Arizona)
Posts: 76
Posts: 76
Posted:
Just found this information in a handout from a class I went to this weekend put on by CAI -
Cash - Cash method accounting is like a personal checkbook which tracks when cash is received or paid out. Income is recorded when a deposit is made. Expenses are recorded when a check is written. Cash mehtod financial statements are easy to understand and to prepare. However, they don't give the full picture since they omit information on unpaid bills or uncollected assessments.
Accrual - Accrual accounting tracks all transactions, even if cash is not received or paid out. Income is recorded when the assessments are due instead of when collected. The same is true for expenses. Expenses are recorded when they are incurred. For example, if the HOA buys new equipment, the purchas is recorded even if the bill has not been paid. Because it tracks all income and expenses, accrual method accounting more accurately records the financial activity of a particular time.
Modified Cash - It is a blend of cash and accrual methods. With this method, most transactions are recorded on the cash method, but some are logged on an accrual method. For example, accounts receivable (amounts owners owe the HOA) are recorded as they are billed (accrual method). Expenses are recorded as fills are paid (cash method). Other accrual adjustments, such as prepaid expenses and income tax accruals, are not made. The modified cash method is less complex than accrual method, but during an audit, a CPA often must convert the financial statments to accrual method since it more accurately groups income and expenses in the fiscal year to which they apply.
Just sharing....
Cash - Cash method accounting is like a personal checkbook which tracks when cash is received or paid out. Income is recorded when a deposit is made. Expenses are recorded when a check is written. Cash mehtod financial statements are easy to understand and to prepare. However, they don't give the full picture since they omit information on unpaid bills or uncollected assessments.
Accrual - Accrual accounting tracks all transactions, even if cash is not received or paid out. Income is recorded when the assessments are due instead of when collected. The same is true for expenses. Expenses are recorded when they are incurred. For example, if the HOA buys new equipment, the purchas is recorded even if the bill has not been paid. Because it tracks all income and expenses, accrual method accounting more accurately records the financial activity of a particular time.
Modified Cash - It is a blend of cash and accrual methods. With this method, most transactions are recorded on the cash method, but some are logged on an accrual method. For example, accounts receivable (amounts owners owe the HOA) are recorded as they are billed (accrual method). Expenses are recorded as fills are paid (cash method). Other accrual adjustments, such as prepaid expenses and income tax accruals, are not made. The modified cash method is less complex than accrual method, but during an audit, a CPA often must convert the financial statments to accrual method since it more accurately groups income and expenses in the fiscal year to which they apply.
Just sharing....
RogerB (Colorado)
Posts: 5,067
Posts: 5,067
Posted:
We use cash accounting because it is the easiest for Board members to understand. With bills paid promptly and an accounts receivable report along with an income statement and balance sheet it provides the information needed. Who really understands a financial report which records income before it occurs?
JanP1 (Arizona)
Posts: 76
Posts: 76
Posted:
What internal safe guards does your accountant have you put in place?
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